What do you think are the advantages and disadvantages of transnational mergers and acquisitions

Transnational mergers and acquisitions are one of the economic operations that one enterprise tries to obtain the dominant privilege of the other target enterprise by means of purchasing partial or all of the assets belonging to the target enterprise by cash, securities or other types of assets. Such kind of commercial operation happens almost everyday. It does bring companies getting stronger and more competitive sometimes but also bring the negative impact to the company. We hereby present the advantages and disadvantages of transnational mergers and acquisitions. The advantages are:

1) It can provide additional capital for the renovation of the company. Transnational

mergers and acquisitions may give continuous power of fund for developing the company, which also increase the competitiveness of the company and improve the market share.

2) It can effectively help enterprise participate the international labor division. The local

labor and economy may benefit from the merge and acquisition, which also help the balance of the global economic development.

3) It can foster high-educated intellectuals. The merge and acquisition need the

exchange of minds and management skill, it is like fresh new blood to the company, more and more skilled employees are educated and serve the countries.

4) It also can bypass trade barriers, make use of legal smart ways to reduce tariff and

costs in some countries and make more profit.

5) More profit means more shareholder’s value. Such operation could help company

increase stock value and benefit the investors.

The disadvantages are:

1) It may bring culture clash problem. The new company may have different

management types and enterprise culture including views of distinctive ethnic value and religious belief. These problems could result in more serious impact to the company if it can not be resolved properly.

2) Transnational mergers and acquisitions may also jeopardize the independence of the

local countries. The transnational companies try to draw the profit from the local countries to the own countries. In addition, the local company may have more dependence to the international companies.

3) Most of the transnational companies do not want to give real know-how to the local

company, they only want to use the local low labor to reduce the cost of production, which may limit the local technical development.

4) Transnational mergers and acquisitions may damage the local enterprises’

development. Normally the transnational companies have more fund and know-how and have more resources in the international market, its advantages can help them

occupy the local market quickly. Local competitors lack of fund and technologies, they can not compete with these international companies. Some of local competitors may bankrupt or be purchased by other bigger fishes. The national industries have more risks to be impaired.